I share in much of the discontent of the folks who 'Occupy
Wall Street,' and many other locations around America
today. But I wish there was a clearer
sense of exactly what the protesters feel is wrong, and what they think might
be better alternatives, than what I have seen in media coverage. I am hoping these mass gatherings will be a
catalyst for positive change and improved circumstances for the average person,
as we really need to turn things around and make things better, but I think
that requires both a sense of great purpose, and that the kind of change people
are hoping for is clearly stated. Just
lashing out, by playing the blame game, perpetuates and justifies the Wall
Street folks' sense of "us against them' thinking, by giving them a good reason
to hate other people. But this protest --
which now has spread to cities all around the country -- is a remarkable
opportunity for a great purpose to be served, if the right message comes out of
it. It could bring meaningful change,
but the public needs to understand what it is all about, and to get that
message clearly, rather than imagining all that's happening is a bunch of young
people milling about, who are demonstrating that they can whine and complain
loudly.

Unfortunately; what the media shows is mainly that the protesters are upset with the finance sector and with corporations, and angry
about the current state of affairs. But
getting the right message across is crucial to meaningful change. While I appreciate the fact that celebrities
can bring attention to a cause; I think the suggestion made by Roseanne Barr
(decapitation), echoing the discontent of the protesters with Wall Street and
Finance folks, did far more harm than good.
It would not help anything for a lynch mob mentality to prevail, when
what's needed is more sensibility, or fairness.
Of course, the American people have a reason to be upset about the sorry
state of the economy, and angry at the people who were rewarded -- in effect --
for taking the rest of us to the cleaners.
A lot of people have seen through the lies that make the playing field
unleveled and keep things from being handled fairly; but many folks who are in
a position to know, and who know better, are keeping their mouths shut -- so as
not to offend their superiors. Now too
many of those people have already lost their jobs, while others who recently
completed their education now can't get a job, so growing numbers are out in
the streets protesting. However; they
need to send others a clear message! I
think it's time for someone to point out that the Emperor has no clothes.

You see; once the truth is out, and enough people know that
certain falsehoods will no longer be ignored or tolerated, some of those who
lied to keep their jobs will find that their lying has cost them a job
instead. One way we can expose the lies
is by fixing some of the bad Math used in the world of Finance. Simply put; much of that Math is extremely
outdated and ill-equipped to deal with the rapidity and complexity of
variations possible in modern stock and commodity exchanges, but there have
been many advances in Mathematics which could improve Financial Math
fundamentally -- increasing its power to make predictions and estimate risk
accurately -- while making it inherently more transparent. If we fix the Math, it will be much harder
for crooked people to get away with financial murder, but certain basic
assumptions need to change, for that to happen.
Perhaps the most important thing to change is the assumption that the
folks who control the wealth are more intelligent than the rest of us, because
they are financially successful. There
are plenty of other ways to get rich, especially if you can fool people into
believing you know better ways to make money than they do, but some people
really are more intelligent, and they see through the ruse.

Had people heeded Benoit Mandelbrot's book on the (mis)behavior
of markets, the crash in the Fall of 2008 might never have happened. He cautioned us about specific errors of
judgment that are common in the world of financial Math, but should be avoided. Unfortunately this did not keep folks from
believing in a bit of mathematical sleight of hand called the Gaussian Copula
Function, by which someone named David X. Li knit together two well-known risk
estimation formulas to create the basis for CDOs -- which are otherwise known as
derivatives. Although the statement that
risk which can be accurately predicted and thus contained is the same as no
risk seems plausible, it is a lie. There
is a fatal flaw in the Math as well.
Li's equation assumes that certain variables will always act like a
see-saw, so that if one goes up the other goes down. But when the housing market and the liquidity
of the banks both went down, the real risk of a bursting bubble was seen. The idea that a risk-free investment
instrument had been created was shown to be a lie. But the lies created, or covered over by bad
Math in the world of Finance, are many indeed.
The fallacies at work in the world of high finance reach deep into the
core of Economics. And worst of all; the
people in charge don't want to be told how to fix things or that there are
better ways to do things, according to folks I know who have worked for Wall
Street firms.

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Part of the problem, according to one person I spoke with,
is that before the finance sector began using mathematics sophisticated enough
to do the job, some people would need to go back to school for another year or
two of Mathematics. Of course, this
seems silly to Wall Street folks. If all
of the outsiders already believe you are an expert, why bother taking Math
classes? If you can keep up appearances,
by lying about how much you do and don't know, you can keep on making money --
by fooling others out of theirs -- even when markets go down. But, at some point, such a lie becomes a
deliberate and malicious act of deception, a con job. Fortunately; for those who do understand
higher Math, or have read the books by Mandelbrot and others, it's easy to see
that the old school approach to Economics and Finance is rife with lies,
half-truths, and mistaken assumptions.
And some of these fallacies are easy to spot without any knowledge of
advanced Math, or any specialized training in the subject of Economics. The tricky piece of this story is that some
of the most obvious deceptions have come to be presented in a way that makes
them appear quite plausible, or even logical, which makes them easy to
accept. However; this appearance of
reasonability gives the crooks and liars a wall to hide behind.

One big lie in the world of finance is what Alfred North
Whitehead called the 'fallacy of misplaced concreteness' or reification -- where
abstract entities are treated like things erroneously. If you've ever heard about a stock having
momentum, you know what I am talking about.
A stock is not like a ball, which is massive and solid -- with a definite
trajectory when set in motion. It is inherently unpredictable, and varies in
weight or value. The numerical value of
a particular stock rises and falls with each exchange, and only after a certain
number of exchanges take place can one discern its motion or its average
direction over time. It has been said
that economists display a kind of 'Physics envy' by co-opting some of the Math
which came out of the physical sciences.
But basing Economics on Classical Physics is just plain wrong! Market systems are far more like Quantum
Mechanics, where there is a certain amount of built-in and unavoidable
uncertainty, and where the exact value of certain observables is unknown and
unknowable -- except through interactions which also serve as measurements. Things assume a particular value, in the
Stock Market, only when a trade is executed.
There always has to be both a buyer and a seller, and they must always
agree on an exact sale price, so their interaction sets the value of that stock
-- which was free to float until they reach a point of agreement.

There is a fairly well-developed body of mathematical
knowledge which has come to be employed in Quantum Physics and elsewhere, that
is well-suited for the job of modeling modern market systems accurately. There are also plenty of individuals who are
skilled in the maths required to develop those models, including a fair number
of out-of-work scientists who would be happy to find work that pays well. We need Math designed to handle the specific
kinds of complexity we find in today's financial markets, and that Math exists
now! What has been learned in
Mathematics since Economics was first developed provides an impressive set of
tools we can use in developing better mathematical models. However; that knowledge is not being put to
use, and it can't help us manage things better until we do actually use
it. Perhaps some of what has been
learned in Chaos Theory could help us to set things up in a way where it would
be easy to keep things from ever getting chaotic, so we never have to worry about
market crashes again. Imagine that! But such a scheme could only work if it was
adopted fairly broadly, or by some of the larger financial markets. Once a more intelligent system is put into
place, by key players, its advantages would become apparent so rapidly that
we'd have others adopting it quickly -- just to keep up.

My prediction is that when a better financial system is put
in place, we will see a general uptick in the economy, as it will favor a
win-win scenario over one where there always have to be losers for somebody to
win. Our current system encourages
people on Wall Street and elsewhere to create losers in order to win financial
gains, because the fact that some folks have been given free rein to trash the
finances of others -- who in many cases did nothing wrong -- amounts to a kind of
sanction for their bad behavior. So it
may be right to target the folks on Wall Street who have been waging financial
warfare against the rest of us, in order to increase their own wealth, but we
must also target the system which enables and encourages that kind of legalized
thievery. We must acknowledge that our
own government and other governing bodies around the world helped establish
that system. However, rather than trying
to take down the existing system; we need to create a better one, a system that
is inherently transparent and unbiased -- which will reward prudent
investors. The goal is not to abolish
the free market economy, but rather to assure that there really is such a thing
as a free market, instead of the badly rigged system in place today.

You see; only when it becomes clear to those in power that
most people see through the lies, and that folks now want a system which is
intelligent and fair, will they have to provide that -- in order to remain in
power. But the prevailing mood or
mentality needs to shift somewhat, in order for such a change to take
place. The mentality prevailing in the
world of Finance today is harmful and toxic to the general economy, but it
could also derail or prevent needed change.
And the inertia of this attitude is every bit as great a problem as
anything I've discussed so far. A recent
Swiss study focused on brokers and traders, comparing them with known
psychopaths, and the outcome was rather disturbing. One might expect seasoned traders to beat the
average, and easily outperform psychopaths, when placed in a game scenario
where the goal is to maximize financial gain.
But the researchers found the opposite was true. Moreover; the behavior of brokers and traders
was found to be "more reckless and manipulative than that of psychopaths,"
according to an article in Der Spiegel, with their apparent intent being to
defeat the opponent, rather than to maximize personal or collective gain. This suggests that some of the folks we trust
with our money are not qualified to play the money game as well as they claim,
or as we might imagine. Worse still;
their effectiveness drops in a situation where maximizing both individual and
collective gain is the goal. It would
seem that the inequities in the system have shaped their personality in such a
way that -- if the system was made fair -- they would perform poorly.

This does not mean that we should hesitate to make needed
changes. Nor should we tolerate lies and
enable devious people's bad behavior, just because that has been 'business as
usual' for so long. The change can come
gently, and in an orderly fashion, but it must happen at some point -- unless we
want frequent market crashes and a dismally slow economy to be the new 'normal.' The majority of human beings
can't live with that, so it is understandable that folks have taken to the
streets in protest. You may not see my
face down on Wall Street. But I know I
have friends, or friends of friends, who have joined the ranks of protesters at
some point over the past few weeks. I
suspect that; if enough 'friends of' are added, most of the people reading this
article could say they know somebody, or know someone who knows somebody (and
so on), who has participated in one of the protests -- that I understand have
now expanded to 70 cities or more. That
indicates a lot of unrest and dissatisfaction with the current order of
things. What began as a kind of
experiment by the folks at Adbusters has become a full-fledged movement. So I hope someone is listening to my rant, as
we already know that there is reason for dissatisfaction, but protesting alone
won't get the job done. Even the
Adbusters' original 'call to arms' suggested that people needed to gather with
a clear intent and a definite purpose, but so far a unified and coherent
message has yet to emerge. I will
continue to hope that this happens.

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www.jonathandickau.com

Jonathan is a modern Renaissance man. He is a Grammy award-winning engineer, a performer, a writer and lecturer, and a scientific researcher. Since recording "At 89" Jonathan has worked on other projects with Pete Seeger, including a 300 song (more...)